Ukraine and Russia strike gas deal

Presidents of Russia and Ukraine agreed earlier this month on the broad outline of a deal [AFP]

Moscow and Kiev have agreed to a deal that will guarantee that Russian gas exports flow into Ukraine throughout the winter despite their intense rivalry over the fighting in eastern Ukraine.

In a signing ceremony on Thursday following protracted negotiations, the two sides promised to get the gas flowing into Ukraine again after a long and bitter dispute over payments.

European Union energy chief Guenther Oettinger said that "we can guarantee a security of supply over the winter," not only for Ukraine but also for the EU nations closest to the region that stood to suffer should the conflict worsen.

Jose Manuel Barroso, the president of the European Commission, announced the "very important agreement" between the two sides.

There is now no reason for people in Europe to stay cold this winter

Jose Manuel Barroso, president of the EU Commission

"There is now no reason for people in Europe to stay cold this winter," he said.

The agreement long hinged on the question whether Ukraine was in a position to come up with the necessary cash to pay for the gas. But a confident Oettinger said "yes, they are".

He said the $4.6bn deal should extend to the spring. Oettinger said it was "perhaps the first glimmer of a relaxation in the relations between neighbours".

Tumbling oil prices

Ukrainian Prime Minister Arseniy Yatsenyuk said the amount his government would pay for Russian gas would fall in line with global oil prices, which have tumbled in recent weeks.

Yatsenyuk said at a Cabinet meeting in Kiev that Ukraine could pay $365 per 1,000 cubic metres from the start of next year, down from the $385 rate agreed earlier this month. He said that figure may be adjusted downward to $378 until the end of the year.

Russian President Vladimir Putin and his Ukrainian counterpart, Petro Poroshenko, agreed earlier this month on the broad outline of a deal, but financial issues, centering on payment guarantees for Moscow, have since bogged down talks.

But with each week, the need for a resolution becomes more pressing, since winter is fast approaching in Ukraine, where temperatures often sink below freezing for days.

Russia cut off gas supplies to Ukraine in June after disputes over Russia's annexation of Crimea in March. Ukraine has since been relying on gas transfers from other European countries and its own reserves.

On Wednesday, Barroso conferred "a number of times" with Poroshenko in Kiev, stressing that "an agreement was within reach," according to a Commission statement.

The EU has said previously that Ukraine would settle its energy debt to Russia with a $1.45bn payment by the end of the month and $1.65bn more by the end of the year.

The EU also said that Ukraine would pay $385 per 1,000 cubic metres for news gas deliveries, which Russia should deliver following advance payments by Ukraine.